Supreme Court Reduces Punitive Damages in Exxon Valdez Case

June 26, 2008

On June 25, 2008, the U. S. Supreme Court issued its long awaited decision in the Exxon Valdez matter. The case arises out of 1989 Exxon Valdez spill where 11 million gallons of oil spilled into the Prince William Sound. The spill led to the deaths of hundreds of thousands of seabirds and marine animals and took a huge toll on the fishing industry.

The court, in a 5 to 3 decision, reduced the punitive damages from $2.5 billion to $507.5 million. A class of nearly 33,000 plaintiffs had previously been awarded compensatory damages of $507 million, which amounted to approximately $15,000 per plaintiff. Justice David Souter writing for the majority found that the case involved reckless action that was “profitless” for Exxon and that has already resulted in a substantial recovery for substantial injury. Justice Souter reasoned that a punitive damages award should be “reasonably predictable” in its severity.

The punitive damages award is in the same amount as compensatory damages, $507.5 million, that had previously been awarded. The case has languished in the courts for nearly twenty years and Exxon will pay interest on the award amounting to approximately $500 million or a total amount of $1 billion. Each plaintiff would have received an award of $75,000 if the U.S. Supreme Court had sustained the $2.5 billion award granted by a federal appeals court. A jury had initially awarded the plaintiffs $5 billion in punitive damages. Exxon had paid $3.4 billion in fines, penalties, cleanup costs, claims and other expenses from what has been termed one of the worst oil spills in U.S. history. A copy of the decision can be found below.

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